Without Monitoring and Corrective Action, Dealership Compliance is Big Hat, No Cattle

This month’s article concludes my series on how to establish and evaluate a compliance management system (CMS) at your dealership. The previous articles detailed three other important components that a true CMS must deliver:

Ownership/board and management oversight: A culture of compliance will not exist at a dealership without directives and buy-in from the dealer.

Compliance programs: Written compliance policies and procedures, as well as training for all necessary dealership personnel, will prevent and significantly reduce regulatory violations, reduce errors, and improve customer satisfaction.

Tracking and responding to consumer complaints: An established and uniform system to track and respond to customer complaints will identify weaknesses in the dealership compliance program.

These three components establish a CMS, but a fourth and final one makes it happen: Managing that system. It may, in fact, be more critical to your CMS than the previous three components. A CMS won’t do the job it should without procedures and practices in place and enforced for compliance monitoring and corrective action. Monitoring your compliance program involves regular compliance reviews and audits.

Dealership compliance reviews should identify procedural or training weaknesses in your CMS. Reviews are more frequent and less formal than compliance audits, and may be carried out by dealership personnel. Compliance audits are more formalized, and regulators recommend that audits be conducted by third parties not affiliated with the dealership.

Reviews

Compliance reviews should be conducted on a regularly scheduled basis, and informally on a daily basis. Regular reviews do two things: First, they give management immediate notification of policies that work, and those that need to be tweaked or revamped. Second, they serve as a consistent reminder compliance is important and everyone’s responsibility.

Check with employees. Ask them what their compliance responsibilities are, and if they have any concerns or suggestions regarding policy.

Review customer transactions. Are the proper disclosures being given on a regular and consistent basis, and does the deal jacket reflect the same? Are the transactions accurate and complete?

Review policies and procedures. Are they current and effective?

Document the process. Documenting the process will allow for reports to be delivered to ownership, the compliance officer, and appropriate management personnel for any corrective actions that need to take place.

Take corrective action. Corrective action may include new or additional training for individuals, revision, clarification or creation of new procedures, increased oversight in certain areas, discipline, or creation of new policies.

Audits

A compliance audit covers many of the same areas as dealership reviews, but is performed by a third party not affiliated with the dealership. The reason for this is straightforward. A third party reviewing the dealership compliance process is not beholden to ownership or management, and is more inclined to point out deficiencies without concern for stepping on a coworker’s toes.

By monitoring and auditing your compliance program, you give your dealership a functioning compliance management system. This creates a culture of compliance that will become commonplace through an ongoing process. As a result, as the dealer principal, you will sleep better at night, and watch as customer satisfaction continues to improve.

David R. Missimer, [email protected], is General Counsel for Automotive Compliance Consultants Inc. (www.compliantnow.com). He spent 28 years in private practice as a litigator representing lenders, auto dealers, and numerous other entities and individuals.